The Independent Project Board (IPB) will oversee an audit of high cost and legacy defined contribution (DC) workplace pension schemes, to be conducted by the Association of British Insurers (ABI) and its members.
The 10 IPB members will agree terms of reference for the audit with ABI members, scrutinise their findings, and agree what industry-level actions are required to address schemes not assessed as value for money.
The OFT’s decision to audit DC workplace pensions followed its publication of research in September 2013. It found companies could make savings amounting to £30 billion from pre-2001 and high-charging contract and bundled-trust pension schemes, that were not achieving value for money by the standards of modern DC workplace pension schemes.
Pension company Aegon's managing director of workplace solutions, Angela Seymour Jackson, said the audit would give employees “further reassurance that their workplace pension, old or new, is offering value for money”.
“We’re pleased to see such a wide range of senior individuals on the Independent Project Board,” she continued.
“It’s important to have Government, regulatory and consumer representative buy-in to the audit and its findings. This will address once and for all any concerns in the increasingly important DC pensions market.”
The IPB will be chaired by Carol Sergeant, who also holds a non-executive role as the chairman of the UK National Standards Body’s Standards Policy and Strategy Committee.
Other members include Pensions Advisory Service chief executive Michelle Cracknell and Institute and Faculty of Actuaries president David Hare.
Financial services provider Standard Life's head of workplace strategy Jamie Jenkins said the “high calibre” appointments would be “the vital first step in the industry review of legacy pension schemes – an initiative Standard Life wholeheartedly supports”.
“Too many people find themselves in old-style workplace pensions schemes which need updating,” said Jenkins.
“Auto-enrolment gives all employers the opportunity to review their existing workplace pension arrangements.
“We would strongly encourage them and their advisers to reassess old style schemes and grasp the opportunity to ensure they have a scheme which meets the needs of their employees.”
OFT CEO Clive Maxwell said pension schemes that delivered good value for money were “vital to the economy, and individual savers”.
“We therefore welcome the ABI’s pledge to undertake a comprehensive audit of legacy schemes, reporting to an IPB,” he said.
“While we have decided not to refer this market to the Competition Commission at this time, we expect this audit to deliver real value to those with savings in the £30 billion or so pre-2001 legacy schemes.
“It is also important, particularly given that auto-enrolment is already under way, that any recommendations from the Independent Project Board are implemented quickly.”
ABI members are set to finish the audit by the end of 2014.